# Structuring Token Issuance Based on the Business Model

Once the tokenization model has been selected, the issuer must structure the issuance to reflect that model’s financial, legal, and investor parameters. This includes selecting the appropriate token type -whether it represents equity, debt, revenue participation, or a hybrid structure - and ensuring that the rights granted to token holders are clearly defined and legally enforceable.

Each tokenization model is not only a funding strategy but also a legal and financial structure. The tokens issued must accurately represent the underlying rights promised to investors, comply with jurisdictional regulations, and be compatible with trading and reporting mechanisms.

***

## Objective

Align the selected tokenization model with a token structure that is compliant, enforceable, and appropriate for the asset type, jurisdiction, and investor class.

**This includes:**

* Selecting the correct token type (Security, Utility, or Hybrid)
* Defining the token subtype (e.g., equity, bond, participation certificate)
* Embedding investor rights (ownership, revenue share, fixed income, governance, etc.)
* Ensuring legal compatibility with the chosen jurisdiction and investor profile

***

## Issuer Guidance

**Choosing the right token structure is essential to avoid:**

* Misclassification under securities laws
* Inability to onboard retail or institutional investors
* Failure to list on regulated exchanges
* Enforcement risk or investor litigation due to misrepresentation of rights

**The structure you choose must be reflected consistently across:**

* The token smart contract and metadata
* Offering documents and disclosures
* Legal agreements (e.g., participation agreements, subscription docs)
* Regulatory filings and licensing applications

***

## Token Structure Framework

The table below provides a mapping between the business model selected in Step 9 and the corresponding token type, subtype, and core investor rights.

| Business Model                           | Token Type              | Token Subtype                         | Core Investor Rights                                                    |
| ---------------------------------------- | ----------------------- | ------------------------------------- | ----------------------------------------------------------------------- |
| **Full Asset Sale Model**                | Security Token          | Equity or Asset-backed Token          | Ownership of the asset, voting rights, capital appreciation             |
| **Business Growth Capital Model**        | Security Token          | Equity Token                          | Company shares, voting rights, dividends/profit participation           |
| **Capital Raise for Future Acquisition** | Security Token          | Convertible or Hybrid Token           | Right to future equity or profit, conversion at defined events          |
| **Development and Value Creation Model** | Security Token          | Project Equity or Profit-rights Token | Share in future project value or profits, limited control               |
| **Shared Ownership Model**               | Security Token          | Fractional Ownership Token            | Co-ownership rights, share of proceeds upon sale or income              |
| **Revenue or Profit Sharing Model**      | Security Token          | Revenue/Profit-sharing Token          | Right to receive a share of revenue or profit (no ownership or voting)  |
| **Loan-Based Fundraising Model**         | Debt Token              | Fixed-income Token                    | Right to repayment with interest, no ownership or governance rights     |
| **Collateralized Lending via DeFi**      | Utility or Hybrid Token | Collateral-backed Token               | Claim on collateral if borrower defaults, interest earnings (if lender) |

***

### Utility & Hybrid Token Considerations <a href="#utility-and-hybrid-token-considerations" id="utility-and-hybrid-token-considerations"></a>

Although most STOs are structured as security tokens, in some ecosystems, additional tokens may be used for:

* Access to platforms, services, or rewards (Utility Tokens)
* Governance participation in DAOs (Governance Tokens)
* Combining financial rights with ecosystem roles (Hybrid Tokens)

{% hint style="warning" %}
**Note:** Security tokens are currently the only available option. The information is currently provided for educational purposes only.
{% endhint %}

| Use Case                    | Token Type    | Token Sub-Type          | Purpose                                       |
| --------------------------- | ------------- | ----------------------- | --------------------------------------------- |
| Ecosystem access            | Utility Token | Platform Access Token   | SaaS access, feature activation, user tiers   |
| Governance participation    | Utility Token | Voting/Governance Token | DAO decisions, community voting rights        |
| Web3 staking + profit share | Hybrid Token  | Staking Token           | Ownership + APY from platform activities      |
| Convertible debt/equity     | Hybrid Token  | Convertible Token       | Starts as debt, converts to equity on trigger |

{% hint style="danger" %}
**Important:** Utility tokens must not offer financial return; otherwise, they may be reclassified as securities. Hybrid tokens should be issued with caution and professional legal review.
{% endhint %}

***

### Issuer Checklist <a href="#issuer-checklist" id="issuer-checklist"></a>

Before finalizing token issuance:

* Have you selected a token subtype that matches your business model?
* Are the investor rights (ownership, yield, control) clearly reflected in the tokens and agreements?
* Does your chosen jurisdiction permit this token type and structure?
* Is the token eligible for secondary market listing or compliant custody solutions?
* Are there any restrictions on offering this token type to certain investor classes?

***

### Example: Participation Certificate Variant <a href="#example-participation-certificate-variant" id="example-participation-certificate-variant"></a>

In jurisdictions where direct equity tokenization is restricted (e.g., Switzerland and Germany), issuers may use a Participation Certificate structure:

* Legal shares are held by an SPV or nominee
* Tokens represent economic rights (dividends, exit value)
* Rights are governed by a legally binding participation agreement

This allows for fully compliant issuance without amending national shareholder registries.

***


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